The increased composite cap of FDI upto 49% in the Insurance sector is a constructive measure: KPMG

India Infoline News Service | Mumbai |

Enable foreign players to bring in capital required for growing distribution, product suite and strengthening the risk framework

Finance Minister (FM) Arun Jaitley unveiled Union Budget for 2014-15 speech in Lok Sabha today. Addressing the insurace sector, the FM said that the Insurance sector is investment starved and several segments of the Insurance sector need an expansion. The composite cap in the Insurance sector is proposed to be increased up to 49% from the current level of 26%, with full Indian management and control, through the FIPB route.  

Shashwat Sharma, Partner, KPMG in India seemed happy with this decision. He said, “The new government has introduced constructive measures like increasing the composite cap of FDI in the insurance sector to 49 percent. This measure should provide impetus for spurring growth of the insurance industry and enable foreign players to bring in capital required for growing distribution, product suite and strengthening the risk framework. This move may enable existing players to expand their reach in tier-II and tier-III cities.”

He added, “Insurance Amendment Bill will be taken up by the parliament for consideration which is a positive step as laws which are archaic should be revised but we hope it happens soon! Government wants to ensure that insurance reaches poor people. It is a positive step considering the fact that India is underinsured and underpenetrated but one needs to watch out for the mechanics.”

The FM also declared that as part of the legislative initiatives under financial sector reforms, it is proposed to bridge the regulatory gap under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. This step is expected to facilitate effective regulation of companies and entities which have duped a large number of poor and vulnerable people in this country.
 

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